/ 17 April 2013

Telkom agrees to R449m fine for ‘abusing its dominance’

Telkom Agrees To R449m Fine For 'abusing Its Dominance'

The settlement agreement was reached on the basis that the commission withdraws its cross appeal and Telkom withdraws its appeal from the Competition Appeal Court, the commission’s statement said on Wednesday.

“The withdrawal of the appeal and cross-appeal was approved by the Competition Appeal Court [CAC] on April 12 2013 and the CAC’s confirmation was communicated to Telkom on the April 16  2013.”

According to the Competition Commission, “The effect of these withdrawals is that the matter is now officially finalised and that Telkom will pay an administrative penalty of R449-million, in accordance with the Competition Tribunal order, which was handed on 07 August 2012.”

The Competition Tribunal in August 2012 found Telkom was found guilty of abusing its dominance in the telecommunications market between 1999 and 2004.

It was said at the tribunal hearing last year that the Competition Tribunal "imposed a penalty of R449-million on Telkom SA Limited for abusing its dominance in the telecommunications market between 1999 and 2004, a period in which Telkom was a monopoly provider of telecommunications facilities".

At the time, Telkom stood accused of abusing its dominance by charging excessive prices, refusing access to an essential facility and engaging in price discrimination thereby making its downstream rivals less competitive in the telecommunications market.

Telkom fined 5% of market capitalisation
The whopping R449-million fine amounted to 5% of Telkom's market capitalisation of R9-billion – or two-and-a-half times the company's operating profit of R179-million for the financial year ended March 31 2012.

According to the Mail & Guardian, the case took seven years and numerous legal challenges before it was heard by the tribunal and made it to the tribunal in October 2011.

The complaint was lodged with the Competition Commission by 21 entities, which included the South African VANS (value added network services) Association, the Internet Service Providers' Association and 19 other value added network service providers.

By February 2004, the commission had completed its investigation and referred its case against Telkom to the tribunal.

However, Telkom decided to challenge the commission's jurisdiction in the Supreme Court of Appeal, a legal move that resulted in a five-year delay to the tribunal hearing, but which was ultimately lost by Telkom.

Some subsequent legal challenges, followed based on the commission's decisions to amends its papers, which have since been resolved and the case finally reached the tribunal.